Greater growth is what's needed to lift the well-being of Canada's middle-class and all those working so hard just to get to the middle-class.
April 14, 2015
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Good morning everyone. Greetings and good wishes from the Parliament of Canada, and especially from Justin Trudeau and our National Liberal Caucus. Thank you for coming.
I’ll do my best to keep things moving quickly this morning. I presume you all want to get over to the Court House for another day of the Duffy trial. I wouldn’t want to keep you from this most significant exercise in government transparency.
I’m grateful to “Canada 2020″ for being our hosts today. I’m glad to kick-off this new “Breakfast Series” on economic issues. I also want to thank my colleague, Mauril Belanger, the MP for Ottawa-Vanier, for spreading the word about this event — on very short notice. Mauril, thank you very much.
What I want to talk about this morning is economic growth — or the lack thereof over most of this past decade.
Greater growth is what’s needed to lift the well-being of Canada’s middle-class and all those working so hard just to get to the middle-class. It’s the key to fairness. It’s also key to balancing the federal books and, more importantly, keeping them balanced for any appreciable length of time. The Harper government has failed on all these counts, and Canada needs a better economic plan.
This is a good day for a discussion of middle-class economics. It was exactly two years ago today that Justin Trudeau became Leader of the Liberal Party of Canada, and no one has done more to put the middle-class at the forefront of public policy. But some folks still won’t listen.
One thing is clear. Canada needs a new plan for the economy. One that’s fairly built around the middle-class and all those working hard to get there.
A week ago in Toronto, Finance Minister Joe Oliver unburdened himself of a remarkably bitter speech that largely ignored middle-class realities.
Now, don’t get me wrong, it was good to see the Minister out and about. We haven’t seen him much in Parliament. He’s made it to the Daily Question Period only five times since last December. And befuddled by oil prices, he punted his budget into a whole new fiscal year. So people were anxious to hear what he had to say last week. Sadly, he contented himself with an absurd dissertation about the history of balancing budgets. He seemed totally obsessed with the 1970’s, and his memory was highly selective.
He forgot the OPEC oil crisis of that decade. He forgot John Diefenbaker’s six consecutive deficits a decade earlier. He forgot that only one Conservative Prime Minister in all of the 20th century actually managed to balance a budget — that was Robert Borden, the year was 1912, and it lasted for just one year.
But more importantly, Mr. Oliver forgot that more than two-thirds of all the federal debt outstanding in Canada today can be attributed to the deficits accumulated by Brian Mulroney and Stephen Harper.
Mr. Harper alone has added $4400 in new Harper-debt for every man, woman and child in Canada.
Compare that — as Mr. Oliver suggested we should — to the Liberal record. When Liberals last came to government in 1993, we inherited from Mr. Mulroney an economy that the world’s financial media said was eligible for “honourary membership in the Third World”. A $40-billion annual deficit was suffocating jobs and growth. Just servicing that debt was sucking up fully one-third of all government revenues. The IMF was knocking at the door.
Within three years, Liberals eliminated that deficit. We ushered in a decade of surplus budgets. We paid down debt, slashed the debt-ratio in half, reduced taxes, safeguarded the Canadian banking system, secured the future of the Canada Pension Plan, increased Transfers to Provinces to a record high, and invested in families, medicare, education, infrastructure, and science.
Three-and-a-half-million net new jobs were created and the economy grew at annual rates better than 3%. Fast forward to 2006. Mr. Harper took power and inherited a $13-billion annual surplus — probably the strongest fiscal situation in the western world. But in less than three years, he put this country back on the verge of deficits once again. And that was BEFORE — I repeat, BEFORE — not “because of” the recession that began in the fall of 2008.
Through poor policy choices and reckless spending while the economy was still vibrant, Mr. Harper squandered Canada’s fiscal security. The recession made it worse, but it was Stephen Harper who made us vulnerable in the first place.
And note this — that recession (which Mr. Harper still blames for everything) lasted only nine months and ended six years ago. But still Canada struggles with an economy at low ebb. It’s been Stephen Harper’s “diminished decade”.
Far from decent growth, since the Harper government came to power, Canada has had an average annual economic growth rate of only about 1.75% — that’s the worst growth record of any Prime Minister since R.B. Bennett in the 1930’s.
But rather than tackle this weakness, Mr. Harper distracts. He says “not to worry”, we’re still doing better than other countries. Really? Last fall, the IMF was already predicting that 139 other countries would grow faster this year than would Canada, including the US, the UK, Sweden, New Zealand, Australia … even Ireland and Greece and many others. And that was before the big downturn in oil.
A more recent analysis by the OECD in March shows improving growth in many major economies — across the Euro zone, in Germany, France and Italy, in Japan and India — but slower growth in Canada. All our major chartered banks, have revised their Canadian growth forecasts downward. So has the Conference Board. The Governor of the Bank of Canada says the whole first quarter of this year will look “atrocious”. Statistics Canada says our economy actually shrank in January.
So, the Harper government has failed to achieve meaningful economic growth. What does that mean for the middle-class?
It means weak job creation. The government brags about stale job numbers that are 3 and 4 and 5 years out-of-date. The reality of jobs growth last year was a 60% drop from two years earlier. Unemployment is projected to remain high. Long-term joblessness is getting to be a particular problem.
Job quality is also on the decline. The CIBC says it’s at a 25-year low. Involuntary part-time work is rising. Another 28,000 full-time jobs disappeared in the latest StatsCan survey last Friday. Median after-tax family incomes (in other words, middle-class incomes) are largely flat compared to where they were 30 years ago. Income growth has averaged just less than half a percentage point per year. People don’t feel they’re getting ahead.
Household debt is at a record high — 165% of disposable incomes. Retail sales are down. Major stores from Target to Future Shop are closing.
Three-quarters of those working in the private sector don’t have a company pension plan. The average 35-year-old today is able to save less than half of what their parents did at that age. Among those now nearing retirement, fewer than one-third have even $100,000 put aside to sustain themselves, and another third have virtually no retirement savings at all.
Two-thirds of middle-class parents are worried about affording post-secondary education for their kids. In more than 40% of empty-nester families, their adult children have moved back home (or never left) because the economy is just not good enough to let them get started on their own. And ominously, national surveys show a majority of Canadians believe the next generation will actually be worse off than their parents.
Think about that. It means the fundamental Canadian middle-class expectation of inevitable progress, of upward mobility from one generation to the next, can no longer be taken for granted.
These are the fruits of too little economic growth. Mr. Harper and the elusive Joe Oliver don’t seem to think any of this matters. They have no growth plan. Their only goal — at the expense of all else — is to cobble together a very large tax break for a very small fraction of Canadians, most especially the wealthiest.
To make financial room for that, they sell-off federal assets — everything from the shares in General Motors to an historic tree farm in Saskatchewan. They punch a big hole of nearly $5-billion in current funding for municipal infrastructure. They cut support for the RCMP and other public safety agencies. They clawback money intended for veterans. And yes, they lard on billions of dollars in new taxes.
And what’s all that in aid of? So they can impose Income Splitting for the wealthy — so those earning $233,000 can get the biggest tax break.
This scheme is too expensive — it will cost more than $2-billion every year. It’s unfair — fewer that 15% of Canadian households can qualify; 85% will never get a penny. It favours those who have the most, at the expense of those with the least. It deepens inequality. It does nothing for growth. It won’t create a single job.
Canada can do so much better!
We can have an economic growth plan to drive greater prosperity, ambition, optimism, security and fairness — especially at the heart of our economy, the middle-class.
First, when resources are tight, there’s no room for waste. So why is this government spending $3-billion more per year on expensive external consultants to duplicate the public service. Why have the numbers of political staffers escalated? Why is the Prime Minister’s Office so bloated? And why are your hard-earned tax-dollars being squandered on highly-partisan, tax-paid government advertising? To date, this government’s advertising costs have topped $750-million — three-quarters of a Billion Dollars! Sometimes promoting things that don’t even exist!
How many Veterans could have been helped with that amount of money? How many summer jobs for students could have been created? How many extra Mounties could have been recruited or food inspectors put on the job to keep Canadians safe?
And yet, this profligate government has the gall to drop another $7.5-million for more ads this spring — spoiling the hockey playoffs again to the tune of $100,000 for every 30-seconds of airtime — to flog their long-delayed, already discredited budget. It’s all deeply disrespectful of taxpayers. All sheer waste.
A far better way to manage the country’s finances would be to invest — properly and prudently — in the fundamentals that drive better growth to make our economy bigger and stronger, more competitive, productive and prosperous. A good place to start would be transformative investments in community and public infrastructure. Think of this: urban congestion in our major cities, caused by old and limited infrastructure, costs the national economy $15-billion every year. And much of that is preventable.
When we cast off the mediocrity of this past “diminished decade”, when we regain our ability to be ambitious and hopeful, when we treat each other fairly, when we work together around a common vision of what we have the capacity to achieve, Canadians can accomplish great things.
As fiscal hawks like David Dodge tell us, with interest rates at historic lows, now is the time to build. We can convert that short-term cost advantage into long-term capital assets. As we do so, we will create tens of thousands of good solid middle-class jobs, while building the underpinnings of greater growth, productivity and better jobs in the future. The returns will flow for generations to come.
Support for taking a quantum leap forward on infrastructure is universal. It comes from the G20 and the IMF globally, from the Bank of Canada, and the Premiers, Municipal governments, every major think-tank (including Canada 2020), every major business and labour organization, even the federal Department of Finance!
In their own budget plans, Finance Canada points out that investments in public infrastructure are the single most cost-effective and immediate way to promote jobs and growth — more effective than any other technique, including tax cuts. But this government has chopped it’s flagship “Building Canada Fund” by a whopping by 87%. Sure, they claim to have a 10-year plan, but three-quarters of the money is totally hypothetical until after 2019. And with a deliberately obscure application process, they missed almost all of last year’s construction season — on purpose. To avoid investing. To save the space for Income Splitting for the wealthy. It’s so wrong-headed.
Every dollar into roads, water or transit brings growth of $1.20. A dollar into affordable housing brings growth of a $1.40. A billion dollars into infrastructure stimulates 16,000 person-years of good employment. And it will continue to pay dividends, because we’ll lay the foundation for a more successful and prosperous country for years to come — one that’s more resilient, both economically and environmentally.
A similar argument can be made for investments in higher learning and advanced skills — our intellectual “infrastructure”. Right now, just over 50% of Canadians have some level of post-secondary education — that includes universities, colleges, polytechnics, apprenticeships, on-the-job up-skilling, the whole gamut. And that’s good. But 70% of all the new jobs of this coming decade will require skills beyond high school. Not 50% — 70%!
Urgently, we need to close that gap. The challenge is especially large for Aboriginal young people (they’re the fastest growing segment of our population), and new Canadians, children in low income families, adults with literacy limitations, those living with disabilities and others who have been marginalized.
We need a far more inclusive workforce. We need a culture of lifelong learning. And that means tearing down the barriers that block the way to greater Canadian brainpower. Couple that with our capacity for scientific research, new technology and innovation.
This didn’t used to be a sore point for Canada. According to the OECD, we used rank in the “top-ten” countries for total investments in R&D. Not anymore. Under the Harper government, we fell back. Among OECD countries the average total investment in R&D comes to about 2.4% of GDP. Canada has dropped to 1.6%. We invested less in 2012 than we did in 2004. Programs and facilities have been closed. Scientists have been fired and muzzled.
We can and we must do better — both in government and the private sector.
And in addition to what can be achieved by applied science driven by the private sector, we need to rebuild federal support for curiosity-based, pure science and discovery once again. It’s all about brainpower, the creation and dissemination of new knowledge, to maximize our utilization of the best new ideas, to be a smart economy, poised for growth, based on science and facts, not the prejudice of ideology.
There’s more to come. The ideas I’ve offered this morning are just a beginning. But the point is this:
When we cast off the mediocrity of this past “diminished decade” ,when we regain our ability to be ambitious and hopeful, when we treat each other fairly, when we work together around a common vision of what we have the capacity to achieve, Canadians can accomplish great things.
One thing is clear. Canada needs a new plan for the economy. One that’s fairly built around the middle-class and all those working hard to get there. One that’s focused on growth, both today and tomorrow. One that restores confidence among Canadians that their children and grandchildren will always be able to do better than the generation before.
Canadians are ready to embrace change. With his plan and his team, Justin Trudeau is ready to provide the opportunity.
I thank you.
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